Ortega Industries manufactures 22,100 components per year. The manufacturing cost of the components was determined to be as follows:

Direct materials	$	190,000
Direct labor		440,000
Variable manufacturing overhead		110,000
Fixed manufacturing overhead		320,000
Total	$	1,060,000

Assume that the fixed manufacturing overhead reflects the cost of Ortega's manufacturing facility. This facility cannot be used for any other purpose. An outside supplier has offered to sell the component to Ortega for $34. If Ortega Industries purchases the component from the outside supplier, the effect on operating profits would be a:

Multiple Choice

• $11,400 increase.

• $34,200 decrease.

• $11,400 decrease.

• $34,200 increase.